1. Field of the Invention
The invention relates to bank systems for printing and processing checks and to merchant check verification systems, and more particularly to a check fraud prevention method which is for incorporation in existing systems for printing, processing and verifying checks.
2. Background
Check fraud is accelerating at an ever increasing rate. The annual losses in the U.S. is estimated to be about $10 billion, with banks and large corporations taking the brunt of the losses. More than 1.2 million worthless checks enter the banking system every day and the number of cases involving fraudulent checks of $100,000 and higher has increased 100% from 1990 to 1994.
Advanced check production systems printing the MICR (Magnetic Character Recognition) codes have been developed, and many special check papers used by banks are widely available. This makes the counterfeiters job easier for the production of counterfeit checks. There are, at present, no known and readily available methods to the banks for effectively blocking the counterfeiters and preventing continuing check fraud.
A typical check scam is for a counterfeiter to obtain temporarily, a bank check or company pay check from an individual, and then to counterfeit the check, copying everything but the name and check amount. Names and amounts may then be added to many such checks, and the checks cashed. This and similar check counterfeits, are difficult for present bank check verification systems to detect.
Other known bank check verification systems which may not be yet incorporated, appear to offer little promise of rectifying attempted check fraud such as that described above. Some are these are as follows:
U.S. Pat. No. 3,829,133 Smagala-Romanoff describes a type of check which incorporates a masked individual code known only to the authorized drawer of the check who has advance knowledge of the key by which the individual code is determined.
U.S. Pat. No. 5,509,592, Oz describes a monetary instrument such as a check, that bears a machine-only readable indication of selected information thereon. The described system and method provides for point of presentation verification of either a signature or other selected check information.
U.S. Pat. No, 4,231,593, Bell Jr. et al, describes a check having first and second coatings, one of which is electrically conductive and the other electrically non-conductive. The objective is to defeat any attempts at check alteration.
U.S. Pat. No. 5,371,798, McWhortor discloses a method of producing a check by dividing the clear band of the check into two parallel portions: one portion printed with ferrous beaded ink and the other portion printed with non-ferrous inks. The aim is to distinguish the genuine check from improperly printed checks.
U.S. Pat. No. 5,594,225, Steger describes a system for retailers to automatically access and verify, a presented personal check account status based on information encoded in a bar code on the face of the check. The system will also verify the account status of Travelers checks or Money Orders.
A careful detailed review of the above patent disclosures results in the conclusion that although each method may be useful in combatting check fraud, particularly those involving personal checks, they would not be effective, separately or combined, in preventing bank check or company pay check fraud scams such as described earlier.
There is, therefore, a need for a check fraud prevention system that is capable of preventing fraud on bank checks and industry wide checks as well as on personal checks. Such a system must be easily integrated into existing bank and retailer equipment to be universally effective.